Media reports on Thursday said that President Napolitano had cancelled a conference appearance to deal with a "disturbing" political development. This comes a day after center-right leader Silvio Berlusconi urged his political allies to walk out from parliament.

Meanwhile, stocks in the U.S. gained following five days of losses, as investors digested the latest batch of economic news and developments in Washington.

The U.S. government left its estimate for economic growth in the second quarter unchanged at 2.5 percent, according to the Commerce Department, while weekly jobless claims fell 5,000 last week to a seasonally adjusted 305,000.

Meanwhile, Congress still needs to pass a short-term spending bill before October 1 to keep the government funded; otherwise it risks a government shutdown. On Wednesday, the Obama administration warned Congress that the Treasury was quickly running out of funds to pay government bills.

In addition, Congress must raise the federal borrowing limit to avoid a debt default by October 17. In a letter to House Speaker John Boehner, Treasury Secretary Jack Lew said that the world's largest economy could run out of cash by that date if the borrowing limit isn't increased.

Republican leaders in the House of Representatives notified members that a vote on raising the debt limit could come as early as Friday.

Back in Europe, France released a consumer confidence survey for September that met expectations. The survey came after the country unveiled its 2014 budget, which included sharp government spending cuts and tax rises that will hit households and consumers hardest, potentially damaging the country's economic recovery.

In the U.K. the final reading for second quarter growth came in unchanged at 0.7 percent. However, a worse-than-expected current account deficit sent sterling lower against the dollar.

In stocks news, shares in Hennes & Mauritz surged by 6.74 percent after the clothing retailer released forecast beating earnings on Thursday highlighting strong summer sales. Retail stocks in general were the standout gainers in trade on Thursday, closing around 0.75 percent higher.

Shares of France's Alcatel-Lucent rose by 6.28 percent after media reports of a potential tie-up with Nokia. Nokia declined to comment when contacted by CNBC.

Shares of Danish energy firm Vestas climbed by 7.86 percent after it announced a large order for a project in the U.S.

Shares of travel firm Tui Travel were higher by 3.9 percent after it revised its operating profit higher on Thursday.

Shares of U.K. bookmaker Ladbrokes sank by 7.6 percent after reporting that profits in its digital division were below expectations.

Thomas Cook posted disappointing summer numbers and said the winter-booking season had already gotten off to a slow start. The group posted a stock market decline of 6.6 percent.